The Government Should Stop Trying to Create Jobs

I cringe every time I hear a politician or pundit talk about how a certain policy will create or destroy jobs. Yes, I get why it’s done; the unemployment rate in America is very high today and many people’s top priority is getting back to work. These people don’t care about savings rates, capital investment, or any other metric for economic health, as much as they care about employment prospects. Fine, but that doesn’t excuse those with power or expertise for using such imprecise and ultimately destructive terminology to describe government policy.

The purpose of economic activity is to make a profit. Individuals create products and services to be sold at a greater value than they were produced for. A healthy economy is one in which more products of higher quality are produced at greater profit rates. This is accomplished when individuals save money to be invested into productive activities.

The key is that the individual desire for personal gain is the driving force behind the producing, selling, and buying which makes up economic activity. Adam Smith noted the importance of self-interest all the way back in the 18th century with his famous passage about the butcher selling meat for the sake of personal gain. This selfish drive for wealth is the engine of economic growth; it is the progenitor of the creativity, savings, investment, and production which creates economic prosperity for all.

The crusade for job creation misleadingly draws attention away from the cause of economic growth and towards its secondary consequences, thereby inadvertently creating confusion between causes and effects. The butcher does not make and sell meat to provide jobs to his employees any more than the consumer buys computers to help out Microsoft. The fact that economic growth tends to create more jobs is a necessary side effect, but it should not be thought of as the goal of economic prosperity.

Furthermore, the concept of “job creation” is oddly homogenizing. The term, “job” can refer to a vast plethora of potential activities conducted for the sake of compensation. If the economy were to “gain” 10,000 jobs, that could mean anything from an increase in 10,000 software engineers, to 10,000 bus boys, to 10,000 prostitutes (not that they aren’t productive). Therefore, even as a broad proxy, learning the change in job numbers for the economy is pretty much worthless as an indicator of economic health.

My fear is that misleading language about job creation can lead to political pushes for policies which are bad for the economy but seemingly good for job creation. This has always been a Keynesian policy, but many voters aren’t explicitly aware of the voodoo economic claims behind state attempts to boost aggregate demand. However, if President Obama keeps touting “job reports” in his speeches, he will legitimize these aims and make job creation the implicit goal of all economic policy.

Such aims were behind many of the disastrous policies of the New Deal and more recently Obama’s stimulus programs. This is why we are endlessly subjected to calls for “infrastructure improvement” like wheel chair ramps in deserted slums of Detroit or green energy schemes like Solyndra. And we cannot forget the great benefits of natural disasters like hurricanes and tornadoes since they create jobs, never mind the lack of houses for those employed Americans to live in. To many unemployed Americans, the fact that these projects are not just useless, but costly to the economy, is irrelevant as long as they can provide some short term employment.

On the other side, we heard about how the federal budget sequestration earlier this year would “cost” the US millions of jobs. This is held up as the very worst thing that could ever possibly befall the economy. Yet when jobs are eliminated, it is virtually always due to rational calculations conducted by business owners to cut costs and strengthen profits. Such actions should be applauded, rather than condemned.

I propose that we completely do away with any language involving creating jobs as a goal or destroying jobs as an obstacle. Economic value should be thought of in terms of profits and productivity, not costs and employment.

Matt Faherty is a government relations intern at The Heartland Institute. Faherty is a senior history major at the University of Chicago who focuses on the American Gilded Age (post-Civil War to WWI) and modern economic history. He is president of UofC's College Libertarian Club, as well as a Campus Coordinator for Students for Liberty in charge of overseeing the development of campus liberty organizations in parts of Chicago. In 2012, Faherty was awarded the Koch Summer Fellowship by the Institute for Humane Studies which placed him with the non-profit watchdog Tax Payers for Common Sense. He is a former blogger for The Motley Fool.